Snapping a two-day losing streak, benchmark equity indices advanced nearly 1.5% on Thursday, with exit polls for four crucial state elections predicting a strong showing by the Bharatiya Janata Party (BJP). The indications emerging from the exit polls led investors to speculate over a possible victory for the BJP in the 2014 general elections, which, according to many prominent foreign brokerages, would be construed as positive for the markets.

According to the provisional data on stock exchanges, FIIs net bought $187 million worth of Indian shares on Thursday the highest in the previous three weeks. In the last two weeks, FIIs have net bought nearly $640 million of Indian equities while the year-to-date (y-t-d) tally stands at $18.04 billion.

The Sensex closed the session at a one-month high of 20,957.81, up 249.10 points or 1.2%, from the previous close and the Nifty ended at 6241.10, up 80.15 or 1.3%. During the day, the Sensex crossed the crucial psychological level of 21,000, but could not hold the gains due to profit-booking and short-selling seen at higher levels.

According to American financial services major Bank of America Merrill Lynch (BofAML), the market is looking for a strong and stable government following the 2014 elections. “If the results are in line with the exit polls, we think it would be positive for the market. It seems these results will likely make the market think that BJP could emerge as the lead party in the 2014 elections,” stated Jyotivardhan Jaipuria, head of research, BofAML, in his research note. Jaipuria added that a stable government after the general elections would find it easier to undertake reforms, which would help domestic demand- driven sectors such as autos, banks, industrials and cement.

While Japanese financial services firm Nomura, in its research note, cautioned that results from exit poll surveys may differ from the official results, it concluded that markets would react positively to emerging trends. "The overall trend of BJP performing well seems consistent across exit polls. As such, markets are reacting positively to these exit poll numbers,” the report stated.

Market breadth was strong, with 20 out of 30 Sensex companies ending in the green. ICICI Bank was the top gainer on Thursday. Shares of the country’s largest private sector lender jumped 6.6% on the BSE, followed by that of HDFC Bank and Larsen & Toubro, both gaining 4.5% each. Other gainers include BHEL, Maruti Suzuki, Coal India, State Bank